CAIIB Paper 4 BRBL Module C Unit 3 : Introduction To SARFAESI Act, 2002 (New Syllabus)
IIBF has released the New Syllabus Exam Pattern for CAIIB Exam 2023. Following the format of the current exam, CAIIB 2023 will have now four papers. The CAIIB Paper 4 (BANKING REGULATIONS AND BUSINESS LAWS) includes an important topic called “Introduction To SARFAESI Act, 2002”. Every candidate who are appearing for the CAIIB Certification Examination 2023 must understand each unit included in the syllabus.
In this article, we are going to cover all the necessary details of CAIIB Paper 4 (BRBL) Module C (IMPORTANT ACTS/LAWS & LEGAL ASPECTS OF BANKING OPERATIONS – PART B) Unit 3 : Introduction To SARFAESI Act, 2002, Aspirants must go through this article to better understand the topic, Introduction To SARFAESI Act, 2002 and practice using our Online Mock Test Series to strengthen their knowledge of Introduction To SARFAESI Act, 2002. Unit 3 : Introduction To SARFAESI Act, 2002
SARFAESI Act, 2002
Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act 2002) came into force from June 21st 2002 and extends to the whole of India.
It has brought a legal framework for the following important activities in the credit market:
- Securitization of financial assets
- Reconstruction of financial assets.
- Recognition of any ‘interest’ created in the security for due repayment of a loan as a ‘security interest’, irrespective of its form and nature but when it is not in the possession of the creditor.
- Power to enforce such a security for the realization of money due to banks and the financial institutions in the event of a default, without the intervention of the Courts.
- Enabling provisions for the setting up a central registry for the purpose of registration of transactions of securitization, reconstruction and the creation of the security interest.
There is an obligation on the part of the borrowers to repay loans and if they are unable to repay, then the securities for the loans can be sold without intervention of the Courts of Law or Tribunals, by following the procedure as provided in the Act and the Rules framed there under, for recovery of the loans.
The Act is applicable to cases where security interest for securing repayment of any financial asset is more than Rs.1 Lakh and the amount due is 20% or more of the principal amount and interest thereon.
The Act is not applicable to any security interest created on agricultural land and certain properties not liable to attachment under some specified Acts.
Creditors other than secured creditors not eligible to exercise right of enforcement of securities under this Act.
The borrower can file an appeal to the DRT only after depositing seventy-five per cent of the amount claimed by the lender. The Supreme Court declared this condition of the deposit of seventy five per cent of the claim amount as unreasonable, oppressive, arbitrary and violative of the Article 14 of the Constitution. The Act has since been suitably amended by deleting the condition of pre-deposit of the amount for filing an application/appeal under Section 17.